Investors interested in Computer - Networking stocks are likely familiar with Digi International (DGII) and Cisco Systems (CSCO). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Digi International has a Zacks Rank of #2 (Buy), while Cisco Systems has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that DGII likely has seen a stronger improvement to its earnings outlook than CSCO has recently. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
DGII currently has a forward P/E ratio of 16.90, while CSCO has a forward P/E of 17.05. We also note that DGII has a PEG ratio of 0.99. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CSCO currently has a PEG ratio of 2.38.
Another notable valuation metric for DGII is its P/B ratio of 2.2. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CSCO has a P/B of 5.82.
These are just a few of the metrics contributing to DGII's Value grade of B and CSCO's Value grade of C.
DGII stands above CSCO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DGII is the superior value option right now.
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Digi International Inc. (DGII): Free Stock Analysis Report Cisco Systems, Inc. (CSCO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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